Gwyn Roberts

07/12/2011 Author: Gwyn Roberts

Editor's view: 7 December 2011

It’s not easy being a fund of hedge funds. While single managers have grown in relevance since 2008, many FoHFs have been outmoded – dismissed as fee greedy, over-correlated, asset gatherers; steam driven managers, struggling in the digital age.

At first glance, HFMWeek’s FoHF AuA survey (see feature, p17) bears testimony to this battle to embrace modernity. Over the past six months, assets within the FoHF sector have stagnated, with no confident predictions of growth past the current downturn.

The picture looks rather bleak. Yet, behind the sepia-tinged visage of an old-fashioned sector, there lies a more positive story. In the midst of a performance downturn, FoHFs have held their own, benefiting from inflows that have cancelled out performance losses.

Investors remain interested, because the best of this sector continues to do something quite special. Firms like Mesirow and Hermes BPK are displaying a thirst for hedge fund ‘best practice’ that has gained traction with investors and helped to foster a wider self-improving zeal – particularly over an issue like corporate governance.

The canniest are also diversifying – offering niche strategies, bespoke portfolios and the sort of investment advice normally associated with an Aksia or Albourne. The latter risks cannibalising the lucrative twin layer of fees associated with FoHFs. However, this evolution is necessary if the FoHF sector is to secure the same continued relevance as its single manager cousin. 

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